Before the closing entries were made at the end of 20X2, the following data were taken from the accounts of Joe Corporation: $$\begin{array} { | l | r | }
\hline \text { Share capital } & \$ 70,000 \
\hline \text { Retained earnings, beginning balance January 1, 20X2 } & 100,000 \
\hline \text { Total revenue earned during 20X2 } & 300,000 \
\hline \text { Total expenses incurred during 20X2 } & 200,000 \
\hline \text { Total cash collected during 20X2 } & 40,000 \
\hline
\end{array}$$ What is the amount of shareholders' equity that should appear on Joe Corporation's statement of financial position dated December 31, 20X2?

Question

Before the closing entries were made at the end of 20X2, the following data were taken from the accounts of Joe Corporation: $$\begin{array} { | l | r | } 
\hline \text { Share capital } & \$ 70,000 \
\hline \text { Retained earnings, beginning balance January 1, 20X2 } & 100,000 \
\hline \text { Total revenue earned during 20X2 } & 300,000 \
\hline \text { Total expenses incurred during 20X2 } & 200,000 \
\hline \text { Total cash collected during 20X2 } & 40,000 \
\hline
\end{array}$$ What is the amount of shareholders' equity that should appear on Joe Corporation's statement of financial position dated December 31, 20X2?

Quizplus · Accepted Answer

Shareholders' equity at the end of 20X2 is calculated as the sum of share capital and retained earnings at the end of the year. Share capital is $70,000. Retained earnings at the end of the year is the beginning balance plus net income (revenue minus expenses) for the year, which is $100,000 + ($300,000 - $200,000) = $200,000. Therefore, total shareholders' equity is $70,000 (share capital) + $200,000 (retained earnings) = $270,000.

Before the Closing Entries Were Made at the End of 20X2